Xerox separating into 2 independent publicly traded cos

The company, with global headquarters in Norwalk, Connecticut, is planning to divide itself into two separate publicly-traded companies, one focused on document technology and another on business process outsourcing services. The names of the two companies, as well as their leadership structures, have yet to be determined, Xerox says.

Xerox and Icahn issued a joint statement today saying that the business process outsourcing company will be led by a nine-member board, three of whom will be selected by Icahn. Xerox plans to separate the company into two independent publicly-traded companies.

Xerox believes that the separation will maximize returns for shareholders and align with current market dynamics.

With a split, Xerox would basically unravel its purchase of Affiliated Computer Services Inc., which it bought in 2010 for $6.2 billion. This happened late past year, so it’s too soon to tell whether this is a boon to either resulting entity, HP and Hewlett-Packard Enterprise. On an adjusted basis, net income from continuing operations attributable to Xerox was $333 million, or $0.32 per share. Icahn can also select someone to observe and advise the search for a CEO of that company.

In a conference call with analysts past year, Burns was asked whether she saw strategic value in having the services business together with the hardware businesses.

Icahn stated that he holds a 9.12% stake in Xerox, an increase from the 8.13% reported last month.

Shares of Xerox (XRX) were up more than 2% in premarket trading Friday to $9.42.

The company expects full-year earnings in the range of $1.10 to $1.20 per share.

Also on Friday, Xerox closed the books on a fourth consecutive year of weaker earnings.

Revenue fell 7.6% to $4.65 billion, below the average analyst of $4.73 billion. The dividend is payable on April 29, 2016 to shareholders of record on March 31, 2016. “They are both strong and both large companies”. We asked George Conboy of Brighton Securities how a company might achieve such steep savings.

The first company will focus on helping businesses process vast troves of documents.

Under pressure from influential investors numerous American corporate are spinning off their businesses and this time it’s Xerox.

While Burns acknowledged that her role in the new companies has yet to be clarified, she was quick to point out that the figures reflect the urgent need to adapt to an increasingly agile document management market. However, the biggest question raised by Xerox’s move is how the document technology side of the business will now evolve going forward, she noted.

But that formula has been sputtering. “While Xerox’s services business has grown in past years, it hasn’t earned enough to counter the slide in its traditional hardware operation”.

Dallas-based ACS was a pioneer in the business of shipping back-office work to countries with cheap labor such as Mexico and Ghana. The company a year ago booked $146 million in write downs after it acknowledged it couldn’t handle some state Medicaid contracts. It will target the healthcare, government services and transportation markets, according to Xerox, as well as the commercial space.

The move comes more than 70 years after the Rochester, N.Y.-based Haloid Co., the company that would eventually become Xerox, acquired the rights for xerography, or photocopying, from Chester Carlson.